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ACCC v Pacific National Pty Limited (No 2)

[2019] FCA 669 (15 May 2019)

 

Overview


Image: By Tjbulic (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Involved vertical merger - arrangements between Pacific National (and related bodies) and Aurizon (and related bodies) in relation to the 'supply of intermodal freight and bulk steel rail linehaul services to various end-users for whom transportation by road or sea was not an economically effective substitute.' (para 1).

The ACCC alleged:

'Pacific National’s acquisition of the Acacia Ridge Terminal from Aurizon would have the likely effect of substantially lessening competition in breach of section 50 of the Competition and Consumer Act 2010 (CCA).

The ACCC also alleged that a ‘terminal services subcontract’ between Pacific National and Aurizon that provided for Pacific National to conduct the day to day operations at the interstate side of the Acacia Ridge Terminal would substantially lessen competition in the interstate and Queensland intermodal rail markets in contravention of section 45 of the CCA.

The ACCC was concerned that the acquisition of the Acacia Ridge Terminal, or the existence of the long-term terminal services subcontract, would deter a new entrant from providing interstate linehaul services in competition with Pacific National.'

(Exernal link symbol ACCC media release)

Justice Beach rejected the ACCC's case relating to s 45 and s 50 (subject to accepting undertakings). Justice Beach noted that, with some hesitation, he would have accepted the ACCC's case on s 50 'but for' the undertaking.

 

Judgment

Justice Beach delivered his judgment on 15 May 2019: Exernal link symbol ACCC v Pacific National Pty Limited (No 2) [2019] FCA 669 (FCA page)

[Summary to follow]

Keywords

COMPETITION – acquisition involving Queensland rail terminal – Acacia Ridge Terminal including the Brisbane Multi User Terminal – access to terminal – acquisition producing vertical integration – discrimination against new entrants by vertically integrated operator – ability to discriminate – incentive to discriminate – reasonable perception of ability and incentive to discriminate – barriers to entry heightened by such acquisition – availability of alternative terminals – Brisbane Multimodal Terminal at Port of Brisbane – standard gauge terminal at Bromelton, Queensland – narrow gauge terminal at Tennyson, Queensland – Inland Rail Project – prospect of new entry – efficiencies from vertical integration – elimination of double marginalisation – intermodal and steel rail interstate linehaul services – market definition – defining market by reference to end users with no ready substitutable services for rail services – two economic conditions supporting definition by reference to end users – capacity to price discriminate amongst users – no capacity for profitable arbitrage – interstate market(s) – north-south interstate market – east-west interstate market – Queensland market – non-bulk steel – bulk steel – competition in the relevant market(s) – substantial lessening of competition – meaning of “likely” – real chance – standard of proof of counterfactual – contravention of s 50 of the Competition and Consumer Act 2010 (Cth) – undertaking proffered by the acquirer – terminal services subcontract – provisions having likely effect of substantial lessening of competition – comparison of factual and counterfactual scenarios – alternative causation case – contravention of s 45(2) of the Competition and Consumer Act 2010 (Cth)

Legislation

Competition and Consumer Act 2010 (Cth) ss 2, 4(1),(4), 4G, 45(1),(2),(3), 46, 50(1),(3),(6), 76, 87B

Exernal link symbol Rail Safety National Law (South Australia) Act 2012 (SA) Sch, ss 50, 52(3)

Exernal link symbol Rail Safety National Law (Queensland) Act 2017 (Qld) s 4

 

 

Media and commentary (external links)

ACCC

ACCC, 'Court dismisses ACCC proceedings opposing rail freight consolidation' (Media Release, 15 May 2019)

ACCC, 'ACCC takes action against Pacific National and Aurizon' (ACCC Media Release, 19 July 2018)

Merger register, Pacific National Pty Ltd / Linfox - proposed acquisitions of Intermodal assets from Aurizon (opposed 19 July 2018)

Merger register

The case was originally considered by the ACCC as part of the informal merger clearance process: Merger register, Pacific National Pty Ltd / Linfox - proposed acquisitions of Intermodal assets from Aurizon (opposed 19 July 2018)

Firm commentary

Gilbert+Tobin: 'Hold the phone!: the ACCC's decision to block the TPG/Vodafone deal' (Gilbert + Tobin Insights, 9 May 2019)

King&Wood Mallesons: Samantha McDonald, 'ACCC hangs up on proposed TPG and Vodafone merger' (In Competition, 17 May 2019)

Media

James Panichi and Laurel Henning, 'M&A law at heart of Australian competition regulator’s courtroom woes' (mLex, 4 June 2019 - run time 16min 43 sec)

Jenny Wiggins, 'Aurizon set for a smoother rail ride' (AFR, 19 May 2019)

'Regulator rails against controversial freight terminal decision' (The Australian, 17 May 2019) (subscription)

Charles Pauka, 'Acacia Ridge: Aurizon wins in court, ACCC not ready to give up' (Transport and Logistics News, 17 May 2019)

John Durie, 'Sims questions rules after Aurizon defeat' (The Australian, 16 May 2019, page 27)

Nick Evans, 'ACCC slams freight terminal ruling' (The Australian, 16 May 2019, page 19)

Jenny Wiggins, ''Factually wrong and misleading': Aurizon strikes back at ACCC' (AFR, 16 May 2019)

Patrick Hatch, 'Air of unreality': Court explains ACCC's defeat in rail case' (SMH, 16 May 2019)

'Is the mergers test broken?' (Chanticleer, AFR, 16 May 2019)

Matthew Stevens, 'The ACCC loses the case it just had to win' (AFR, 15 May 2019)

Amelia Birnie, 'ACCC loses court challenge to Pacific National, Aurizon terminal deal' (Lawyerly, 15 May 2019) (subscription)

Jenny Wiggins, ''We have a problem': ACCC's Rod Sims says merger laws need a rethink' (AFR, 15 May 2019)

Patrick Hatch, ''We’ve got a problem': Sims questions laws after rail go-ahead' (AFR, 15 May 2019)

Charles McConnell, 'Court accepts rail remedy that ACCC rejected' (GCR, 15 May 2019).

Matthew Stevens, 'Qube is the fulcrum of ACCC collusion landmark' (AFR, 28 November 2018)

Joe Aston and Myriam Robin, 'ACCC owes Aurizon and Pacific National chiefs an apology' (AFR, 20 November 2018)

Patrick Hatch, 'Freight giants hit back at ACCC over blocked rail deal' (SMH, 19 November 2018

Paul Garvey, 'ACCC to pay Aurizon legal costs' (The Australian, 19 November 2018, page 19)

Mathew Stevens, 'Aurizon, Pacific National collusion case opens with pruned ACCC claim' (18 November 2018) (also as Matthew Stevens, 'Landmark collusion case pared by ACCC' (AFR, 19 November 2018, page 27)